Building the Foundations for Self-Sufficiency

A comment made by Mark Frazier, Co-founder President of Openworld Inc., has had me thinking. Frazier commented that top-down approaches to aid generally fail. For example, mosquito nets might be used to make dresses, and malaria may continue to spread. Often, the failure of the top-down approach is a failure of distribution of transfers in kind (corruption, misinformation, lack of knowledge and short-sighted preferences). The problem might be fixed by greater oversight but such oversight might be seen as paternalistic, or might simply be underfunded and inadequate. Such arguments against the top-down type approaches to international aid raise questions that challenge big-push theories. From a paper critiquing Jeffrey Sachs’ “The End of Poverty: Economic Possibilities for Our Times:”

Poverty traps occurs when agents fail to coordinate their actions to achieve the optimal allocation of resources. It is argued that this phenomenon makes economic convergence impossible and keeps agents in a poverty trap from which they cannot escape unless a massive and coordinated industrial policy is implemented. This analysis shows that the literature on coordination failures has overemphasized the significance of market failure. It argues that coordination is possible and profitable in a free market system. State intervention is responsible for the systematic misallocation of resources (discoordination), in general, and for poverty traps in particular (Coordination Failures, Poverty Traps, “Big Push” Policy and Entrepreneurship: A Critical View, Bogdan, 2007)

Of course, what this says is that not only is economic growth from top-down aid largely unsuccessful, it is often the inadequacy of the government of the people in question that keeps the people trapped in their current economic situations.

Honestly, the immature side of me wants to laugh; the youthful side of me is happy the kids are getting soccer balls, and humanitarian in me realizes that good intentions are failing to be enough. Just because condoms are being made available doesn’t mean they are being fully adapted into the local community. If we call the slight decrease in the rates of AIDS cases each year in this community a success, then we risk seeing what more we can do to a) decrease the presence of HIV/AIDS, and b) decrease the number of unwanted pregnancies per year. The fact is, while condoms are a nice touch in this battle, the community in question is clearly lacking the necessary infrastructure to battle the very things that are keeping it trapped in poverty. Throwing condoms in the mix is literally like throwing a glass of water onto a burning house–it will wet but not douse the conflagration.

This is the part where I would usually make a comment like, “Here, microfinance can help,” but I’ll refrain from the usual, and instead state the obvious: top-down approaches mitigate, but do not solve, the most pressing problems facing LDCs around the world. In the current recession, fewer are looking to give money to any cause and more are looking to save. The microfinance industry is still relatively strong but can only do so much. It’s times like these that we should explore other means–transcending the actual giving or investing of money and reexamine just how that money is distributed. Furthermore, we should look into shaping the way decisions are made by individuals, incentivizing good decision making that will help individuals in their given societies live better with the means and resources they CURRENTLY have (while foreign investment slowly and quietly injects more money into increasingly successful systems). This is the work of behavioral economics, as far as shaping decision making processes goes, but also the work of anthropologists to understand culture-based incentives and mechanisms, and sociologists to project how change will occur and restructure the society as a whole.

It seems that in the current state of the global economy no “Big Push” or heavy handed top-down approach will occur, most people with any means are looking out for themselves. This is the time we need to learn how to do more with less. Then, when there is more, we can accomplish more.

We are so grateful to the many audience members who took part in our first annual spring colloquium! Despite coinciding with finals at many universities, we had over 100 attendees from a wide range of interests and disciplines, a majority of whom traveled from outside Princeton!

Thanks especially to our wonderful group of speakers. As Dean McGuinness stated in her opening remarks, “Many of the speakers in attendance are ones that I have been trying to bring to campus for four years. The students of Princeton Microfinance Organization were able to accomplish this in 4 weeks!”

We hope that you enjoyed coming to our colloquium as much as we enjoyed having you! Please keep in touch with PMO for future events/projects.

[This applies to all out of town guests who will be driving to the Princeton Campus.]

Parking will be available for visitors, free of charge, in Princeton’s Lot 21. See the map: here.

As you can see in the map, northwest of Lot 21 is Princeton’s football stadium, northwest of the stadium, on the corner of Ivy Lane and Washington Road, is the Lewis Library–the location for the Colloquium.

The walk isn’t too bad, but there is a “TigerTransit” shuttle that serves the lot. The time table for Lot 21 is found here.

IF, for some reason there is no parking available, you will be able to find parking on the neighborhood streets off of Prospect Avenue, or up on Nassau Street. This parking is metered and not serviced by a shuttle–so bring some quarters (and an umbrella, it might be raining) just in case.

PHOENIXVILLE, PA – April 22, 2009 – GreenMicrofinance™, a cutting-edge
Pennsylvania-based triple bottom line company, has set Earth Day,
April 22, 2009, at 5:00 PM EDT, for the launch of its online climate
change and microfinance university network, the GMf University Forum™.

The GMf University Forum, its own social network with a structure
similar to Facebook, provides extensive opportunities to maximize the
flow of ideas. Members will be able to post and partake in discussion
topics; create connections from all participating universities such as
Princeton, Lehigh, the University of Pennsylvania, Kathmandu
University, Nepal, and TISS, Mumbai, India; stay abreast of upcoming
events, including conferences, seminars and talks featuring GMf
leaders; upload their own documents and links to share; and post blog
entries. These tools will support the development of an online
community of like-minded individuals creating momentum to achieve
GMf’s overall mission of knowledge building and creating sustainable
solutions in the field of microfinance through social and academic
networking.

The Forum aims to attract university students engaged in many
disciplines which intersect microfinance and environmental
sustainability, including Environmental Studies, International
Finance, Area Studies, Public Health, Engineering and Technology,
Climate Change Policy Studies, Biology and more. To participate,
students can simply register through an existing university
association link or through a specific discussion of interest.

The University Forum will work closely with the online open-source GMf
Document Library™ and will offer an opportunity for peer
collaboration. GMf gathers and annotates fully downloadable papers on
scores of relevant clean energy and environmental topics available to
anyone in the world. From working plans for bio-digesters to UN policy
papers, the vetted materials have been downloaded by thousands of
visitors. Added professional time will allow for a great expansion of
GMf’s offerings and inclusion of more languages. GMf also maintains
extensive links for assisting people in their research. This
e-Library is used by professional practitioners in finance,
engineering, environmental science, education, as well as by
activists, students, journalists and researchers. There have been
approximately 10,000 visitors interacting on the site.

In addition to the basic features of the GMf Forum, there are others
in the works to enhance its function as a networking tool, such as an
electronic bulletin board for job and volunteer project recruiting.
The GMf Green Energy Tech Wiki is being developed by the Princeton
Microfinance Organization and will allow end users to evaluate all
models and types of clean energy technology, an invaluable resource to
clean energy promoters and consumers the world over. As well, GMfC
plans on launching ‘videos from the field’ to highlight clean energy
initiatives supported through microfinance institutions.

Thanks to the Microfinance Club at the University of Pennsylvania for holding a great conference.

We had a great time!

The conference, entitled “Microfinance on the Move: The Road Ahead,” was held on April 3, 2009 and offered numerous keynote speakers and panel discussions that involved some of the leading microfinance experts from various areas of the field.

To learn more about the Penn Microfinance Club or their annual conference, please visit the Penn MFC website.

PMO looks forward to attending again next year!

Here’s a writeup on the conference from one of our members:

One issue on the tip of many people’s tongues was how the current credit crisis has affected microfinance institutions. It was conceded that some funding from financial investors had dried up. However, that many who invest in microfinance are interested in more than returns was cited as a factor working in the favor of microfinance institutions in this poor economic climate. In other words, people’s consciences apparently prevailed over their pocketbooks during these trying times in the often-made decision to keep the microfinance portion of their portfolio. It is also important to note, though, that microfinance’s returns have held up well, possibly due to the industry’s relative detachment from finance at large. Regardless of the motivation behind the continued investment in microfinance, the industry has demonstrated resilience in the face of a credit-crunch. An unanswered question that remains, though, is whether investment would continue if the returns of microfinance were to flag.